Glocal economy: How two key trends are affecting LA real estate

"Think globally, act locally," used to be a popular slogan, and it's still a nice saying. But today, in a highly complex global economy, it's starting to seem a bit quaint.

After all, the interplay between the local and the global has become increasingly intricate. And there are state and national factors that play key roles as well in shaping decisions about real estate investment and other economic activity.

In this post, we will attempt to illustrate this complexity by pulling together two stories about trends affecting real estate development in Los Angeles. One thread is the role of Chinese investment in American real estate. The other is the state of California's efforts to recast the rules on the development of affordable housing.

Chinese investment

On a global level, there's been lots of anxiety about China's slowing economy and its implications for world economy.

That can be a pretty abstract topic. But on a tangible level, individual Chinese investors have poured billions of dollars into the housing market in the U.S. in recent years. From 2010 to 2015, the amount was upwards of $93 billion.

The investment has not only helped fund construction projects. It has also created jobs and made it possible for about 20,000 Chinese to come to the U.S. by using EB-5 immigrant investor visas.

U.S. housing market

This investment has come at a very opportune time for the U.S. housing market, which took huge hits from the housing crisis of 2008-2009.

The Chinese investment has helped both higher-end and more middle-class markets recover from the crisis and kept a lot of construction crews working. It has also contributed to development projects involving such industries as retail, office space and hotels.

The Chinese aren't done yet, either. According to recently published estimates, direct investment from Chinese sources in U.S. commercial and residential real estate projects could be as much as $218 billion between now and 2020.

Investment could increase even more after 2020, as more and more Chinese investors look for ways to get their money out of China.

In short, large global trends have had had major effects on real estate in specific markets such as Los Angeles. This is made possible, in part, by national policy, in the form of the EB-5 investor visa program.

California state law

National and international factors are therefore very involved in local Los Angeles real estate trends.

It is also important to note, however, that the state of California also plays a significant role. For example, state laws such as the Right to Repair Act fundamentally shape the rights of the participants in real estate transactions.

Critics, including the Los Angeles Times, have blasted the governor's plan. The Times contends that Governor Brown, a former Oakland mayor, is proposing to undercut the key role that localities have in shaping their communities.

Among the concerns these communities have are the environmental issues that come with development. Those issues take place amid a backdrop of state law, particularly the California Environmental Quality Act.

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